case. He previously worked for the US Department of Commerce on trade cases.

He also was an attorney for the US International Trade Commission, where Commerce’s decision to impose tariffs of 219% on the CVD element and 79% in the anti-dumping case goes for judgment.

Perry says flatly, Bombardier will lose at ITC.

Why?

Bombardier’s refusal

Because Bombardier refused to answer Commerce’s questions in the anti-dumping case.

This, he says, was a fatal error that not only will cause BBD to lose at ITC but also on any appeal. US law is clear on the penalties when a respondent refuses to answer Commerce’s questions.

And, Perry says, Canada and the United Kingdom have identical laws that would hammer a respondent refusing to answer questions from their governments in an anti-dumping case.

This makes it highly unlikely that US Commerce Secretary Wilbur Ross or President Trump will negotiate a settlement, he said—something he thought was a possible outcome before the DOC’s decisions were handed down.

Essentially, Bombardier defaulted

Perry writes about this case on his blog (search for Bombardier; the relevant portion is way down in a very long set of topics).

“According to Commerce, Bombardier only submitted arguments in response to sections B through D of the questionnaire,” Perry writes. “It did not provide the facts to support those arguments. Under US AD law, however, Commerce Department decisions and respondent’s arguments have to be based on the facts on the Administrative Record. When there are no facts, Commerce will use All Facts Available.”

Perry continued, “Through intermediaries, I have been told that Bombardier refused to release that information to Commerce because of fear it would be released to Boeing. If that is true, it reveals the failure of Bombardier’s outside lawyers to discuss how Commerce Department Administrative Protective Orders work in AD and CVD cases. Under US AD and CVD law, only outside counsel, not Boeing’s inside counsel, are granted access to Bombardier information and if those outside lawyers reveal that information to Boeing, they can be disbarred. Trade counsel in the US take very seriously the APO requirements under the US AD and CVD Law. In addition, Bombardier’s outside counsel has had access to Boeing’s confidential information under Administrative Protective at the US International Trade Commission so there is simply no sympathy for Bombardier’s arguments”

Airbus-CSeries deal

Following the announcement that Airbus will acquire 50.01% of the CSeries program, reducing Bombardier and Quebec to minority partners, Boeing claimed none of this matters. Neither, Boeing claimed, does the plan to assemble the CSeries in Mobile (AL). The CVD and anti-dumping duties remain, Boeing claimed

Airbus and Bombardier claimed that by assembling the CSeries in Mobile, with US workers, and the fact that about 52% of the CSeries by value is sourced from the US, no duties will be required.

Everyone is wrong, Perry said, and none of it is simple.

“The jurisdiction in AD and CVD cases is ‘in rem’ over the things, products, being imported into the US,” Perry wrote on his blog. “The critical issue is how did Boeing describe the products to be covered by the case and that are in the Scope of the Merchandise Section in the Federal Register notice issued by the Commerce Department.”

Perry notes that the Scope of the case doesn’t cover parts, but “partially assembled” airplanes.

“The scope includes all aircraft covered by the description above, regardless of whether they enter the United States fully or partially assembled, and regardless of whether, at the time of entry into the United States, they are approved for use by the FAA.” (Emphasis added by Perry.)

“The real question is whether Customs will consider any parts imported into the United States to be ‘partially assembled’ civil aircraft,” Perry writes.

What’s ‘partially assembled’?

In an interview with LNC, Perry said wing shipsets from Bombardier’s Belfast, Northern Ireland, plant, fuselage sections from China, where Bombardier outsources a major fuselage section, or BBD’s Montreal, Canada, plant, the cockpit and tail sections from BBD in Canada will likely be viewed as “partially assembled” airplane sections—and subject to duties.

None of the US-sourced components would be subject to duties.

Figuring out the value of the “partially assembled” airplane sections is complex and difficult but not impossible, he said.

The only sure way around any duties is for everything to be produced in the US or to import the wings, fuselage sections and so on in a condition that “partially assembled” doesn’t apply.

But simplistically, the onerous duties of about 300% only apply to 48% of the airplane, not 100%, he said.

If one accepts Boeing’s thesis that the actual cost to Delta Air Lines, which ordered the CS100 and which is the subject of the complaint, is $19.6m, 48% is $9.4m. A 300% tariff would be $28.2m, not the crushing $58.8m most commonly computed.

No response

Delta and Bombardier denied the price to Delta was $19.8m. Unconfirmed market information puts the price anywhere from $23m-$24m to the upper $20m range. Whatever the true price, it doesn’t matter: Bombardier, as the respondent, refused to turn over the data to Commerce for evaluation.

BBD also refused to turn over cost information.

Instead, it presented arguments as to why the information “couldn’t” be turned over.

Perry, on his blog and in the interview with LNC, said this is Bombardier’s fatal error, one that means it will lose at the ITC review of the DOC’s preliminary decision and on any appeal.

A “Review Investigation,” which is normal in CVD and anti-dumping cases, begins a year after the final decision from ITC and takes a year-and-a-half to complete, Perry said. Bombardier might see some relief in the CVD tariff, but because it refused to answer questions in the anti-dumping case, the 79% tariff won’t change.

“The stupid mistake they made was not responding to the dumping case,” Perry told LNC. “If they had responded, the DOC could have calculated a figure” that might have been lower than the 79%. Absent information, the DOC rendered its decision on the basis of “All Facts Available” (which largely were Boeing’s assertions), and BBD’s goose was cooked.

Furthermore, had Bombardier provided information, Perry said a government-to-government negotiation to settle the case might have happened. But not now, he believes.

Appeals to NAFTA and the WTO are also unlikely to succeed, he said. The organizations have their own rules about failure to comply with questions, to which the UK, Canada and the US are signatories.

Who pays the tariff?

Perry said the importer of record pays the tariff. Unless the importer is a Bombardier US subsidiary, it could well be that Airbus will be the importer of record–and Airbus would pay the tariff.

What is this agreement called?
Agreement on Subsidies and Countervailing Measures

‘AD-CVD’?

People sometimes refer to the two together — “AD-CVD” — but there are fundamental differences

Dumping and subsidies — together with anti-dumping (AD) measures and countervailing duties (CVD) — share a number of similarities. Many countries handle the two under a single law, apply a similar process to deal with them and give a single authority responsibility for investigations. Occasionally, the two WTO committees responsible for these issues meet jointly.

The reaction to dumping and subsidies is often a special offsetting import tax (countervailing duty in the case of a subsidy). This is charged on products from specific countries and therefore it breaks the GATT principles of binding a tariff and treating trading partners equally (MFN). The agreements provide an escape clause, but they both also say that before imposing a duty, the importing country must conduct a detailed investigation that shows properly that domestic industry is hurt.

The question should be: Has the US Commerce Department conducted a detailed investigation that shows properly that Boeing has been hurt be the CSeries.

The burden of proof in this case, therefore, lies with Boeing who is making the claim that they’ve been hurt by the Cseries, and is not upon Bombardier to disprove that claim. Why should Bombardier be required to establish a defense if Boeing can’t prove that they’ve been hurt by the CSeries?

I agree… What has Boeing done, amazing, and the USA losing all those military contracts with Canada because of their action, no more P8 to replace the Aurora, no more Super Hornets and no more F-35… Europe has taken all the space now in Ottawa lobby and helping.
On top, a funny consequence of the NAFTA deal falling down Ottawa is planning to sole source CSeries order to replace the vvip Polaris, finally having Canada Prime Minister travelling in a CSeries.

Like I said right at the start of all this, Boeing Defense should have kick some butt at Boeing Commercial aircraft… this created new opportunities for Canada. Thanks to Boeing

You’re kidding, right? Canada was NEVER going to buy the Poseidon. With Trudeau, they’re probably going to turn the RCAF into a giant SAR force, full of Twin Otters, Blackhawks, and Beavers. They’ll be lucky to have maybe a squadron of BAE Hawks left–for airshows/recruitment mostly! LOL

Aviaponcho
Assembling aircraft is usually developing countries ,who have aspirations to develop an industry in their country , do as first step when they buy a fighter . They usually buy a small batch as a finished product and the rest to be assembled on there own soil , using help from the manufacture . Look at the aviation industry history of Israel India and Turkey for example.

Constructing an aircraft from it’s subassemblies is probably the least complicated and the cheapest part of producing and aircraft . I guess most investment is done on designing and licensing it. This is the reason I don’t believe that if the CS is going to be assembled on USA soil that would enable BBD/Airbus to avoid the ruling and offer predatory discounts on it. They would still be forced to charge a market price.

Whatever the possible bias of the regulator, BBD should have played by the rules, by not doing so they have made it easy for the regulator to shrug them off with little recourse. Life may not be fair but in situations like this BBD would have been better off playing the game

Section A requird a full disclosure of all costs of components to arrive to the overall cost of each unit. This is highly confidential info even for a public company. Boing would have had this info a day after BBD submitted it.

After all these years of reading your posts, including the great complaint you were going to make before Boeing quashed it, and I still can’t figured out of you are so totally naive or that blind to your own point of view.

Hint: Boeing quashed your complaint back then either because they knew they were equally guilty or they knew how much trouble/hassle/headache they would get for it.

“a few hundred sales in the US doesn’t break or make the Airbus-CSeries alliance”

That’s a good point. What are the sales of the NEO and MAX by percentage in the US? The CS can succeed in the rest of the world if it is a fundamentally right aircraft, which I believe it is. Question is, if Delta got a great deal, how come the rest of the world wasn’t/isn’t taking that deal? Just cancel Delta and somebody else gets 75 cheap state of the art CSeries. What am I missing?

So the next question is does Airbnb-d need the US market for the Cseries in the foreseeable future? I am no expert but given the scope clause issue and the general move to larger aircraft you could argue that the market is relatively small for the vast efforts expended on it. Sell the A320 in the US and look for orders elsewhere. When the dust has settled look for a political solution down the line.

Excellent idea.Airbus should get on with building a gert big shed immediately,ideally capable of accommodating wide body production just in case. They’ll be needing it for something.
The law has in this case drifted a long way from common sense.

Maybe but my understanding is Boeing walked away from any negoiations once they knew they had Presidents’s / DoC support. You forget,
1. This is a US dispute panel
2. Boeing made it clear they wanted Bombardier ‘broken’;
They were not interested in any settlement that left BBD standing
3 refer to softwood lumber rulings if you are still blind to Boeing’s intent
4. Boeing would have know all BBD’s cost info soon after BBD submitted it. Its easy to leak amid ‘plausible denial’

What would Boeing have gained from the info asked for if they had gotten it? Parts prices mean nothing compared with the prices Boeing pays considering it is a much larger OEM than BBD.
The info was needed to prove the case but now that ship has sailed.

@steve:
“Apart from the 737-7, Boeing does not compete that closely.”
Which is a really funny/ironic claim by U because their whole case against BBD is essentially build upon unfair competition by CS1 against Boeing products….

@Darth Vader:
“They’d have learned exactly how they can price when competing with BBD in any future competitive bids.”
I would hv added: …every “future competitive bid” anywhere worldwide far beyond the legal jurisdiction of U.S. DoC & ITC which demanded such cost details re CSeries program indirectly on behalf of the Boeing sales teams covering all foreign mkts.

And it won’t be only about bidding against BBD in sales campaign. If I were Boeing and armed with component level cost details, I would hv started with grilling those key suppliers for CSeries such as Rockwell Collins, Goodrich Corp, Alenia Aeronautica, etc. which also happen to be Tier1 suppliers for Boeing Commercial….

@Darth Vader:
“Boeing throwing a few million at a crooked lawyer (not sure I need the qualifier) to send them across the information more than compensates being debarred.”
Plus a career opportunity to join the Boeing army of in-house legal counsels/advisors….no need to worry about the bar any more.

Thanks for the article. All it proves is that US trade law is prejudicial. In simple terms, Boeing don’t have to explain their subsidies and their below cost sales, but foreign companies do. In other words the burden of proof doesn’t lie with the accuser it lies with the accused, but only if you are a foreign company

Hasn’t US trade authorities rules against Canadian companies in about 19 out of 20 cases recently? Hard not to suspect that US’s own laws are being interpreted in a strange way. Agree with BBD that NO aerospace company could have honestly answered those questions as to what these particular aircraft will cost. If we take Boeing’s own experience you can see what I mean, they never expected to lose money on 500 Dreamliners.

PS as they we’re negociating with Airbus at this time, and knowing Airbus pricing power, parts costs will have been an unknown as well. As the AS500 Will be bigger than 150 seats the whole case would be new.

I have. Airbus have kept quiet because the pot cannot call the kettle black! In other words Airbus cannot do what Boeing have done. Not allowed!

It’s not just the burden of proof. Equality is another principle, equality in the eyes of the law. In other words one company cannot sell below cost and then complain about another company selling below cost. And so on.

So when are Boeing going to explain how much they charged United for 18 777-300ERs in order to stop Airbus from selling them 18 A350-1000s as well as 45 A350-900s. And so on.

A350 not an American aircraft, irrelevent. I’m curious as to C series being foreign given its US content, seems a bit of a stretch in definitions here.
UTCs reaction eagerly awaited, I’ll bet their looking carefully at competing parts used by BA.

Apparently the 73″ fanned PW1500G is for exclusive use of the CS aircraft.

If AB takes over the CS program it could change, if the US Commerce issues persists an A319NEO with these engines instead of the 81″ PW`1100G’s could be something Boeing has bargained for in the US market?

…and its assembled in the US at Mobile, Canadian engines, maybe even CS cockpit mods, zero tariffs.

So Boeing can accuse Bombardier of illegal subsidies and illegal dumping because the C series has over 50% US content. Does that mean the accusations become invalid if they put RR engines on the C series?

I’ve been saying for a while that BBD forfeited it’s case here in it’s non-response to the administrative law bureaucracy. There just aren’t going to be any C-series in DL livery, or any other US liveries.

The program remains on it’s deathbed, regardless of whether Airbus has committed to support its sales efforts/logistics (without paying a dime). There just aren’t enough tier 2/3 airlines in Asia/Africa etc. looking to buy this size aircraft to support even the tiny manufacturing capability BBD has built.

Boeing owes Airbus a pint. Boeing has made it known that (contrary to what they told DOC) getting involved in the C series is a disaster for anyone. Airbus has taken a bullet to keep it away from the Chinese. AB and BA should be thinking very hard about all those certification experts who are floating about with no new programs.

BBD suspected Boeing to hire some more Commerce departement managers as a thank you note, like they , LM and others do with high US military officers, and get all the data they wanted unless the US intelligence already have provided it to Boeing. Delta might buy MAX’es if Boeing and Commerce drop the fees, otherwise it is Airbus 4ever.

Yeah. Once again, here is the law and its reasoning by the facts that tries to impose on us its dominant view on the subject. Bombardier was right to be wary of individuals in the Commerce Department. Bombardier executives have learned lessons about leaks from the “Echelon” project. No one has forgotten how Boeing obtained DOC information to win contracts at the expense of Airbus. A case perfectly document.

This dispute is more between BOEING and DELTA. DELTA has frustrate BA for the last eight years with political lobby to sell aircraft to foreign airlines. McNeill played along but current CEO has already wrote off current DAL management. BBD was just caught in the middle.

Well if this is the case, the complex entity BBD have created can use the magic of “transfer pricing” to render the tariffs negligible. Also charging tariffs on aviation goods and services is in contravention to several treaties and the EU can retaliate. against US aviation parts. How about parts for 737 for example? China can also do the same with aerostructures delivered to the USA. I am sure BBDs handling of this case was done in concert with the Govt of Canada and some pretty high priced Trade Lawyers so I doubt they “screwed up”.

The duties are not against the CSeries specificially; they are against 100-150 seaters from Canada. I don’t see how the duties would apply to subassemblies from European countries or China, where many of the CSeries parts come from.

Its kinda funny when a US trade lawyer talks about all this nonsense as if US govt entities can be relied upon to maintain confidentiality. Anyone knows these depts are just there to execute trade protectionism and industrial espionage. The US govt has also been hacked so often, it barely hits the headlines any more. Also pricing is irrelevant as a great deal of parts pricing is “internal” done to keep money out of high tax jurisdictions and not remotely related to the actual cost. The ITC knows this, this lawyer also knows this. So he is either a liar or idiot.

“Now the C Series is on the world Aviation map with Airbus.” It would not have been with BBD alone. As far as “Mr. Bellemare was also President of Pratt & Whitney”, P&W had a mess with the GTF. One man does not make a company successful. From the top down, all departments need to be on the same page, sales not over promising, engineering not rushing a design through, and manufacturing and labor processes not rushed to meet an unrealistic an deadline. It seems most OEM’s have a problem delivering on time. Embraer seems to be alone in meeting EIS dates.

I forgot to mention to include Bombardier Transport (Rail) It is huge and making a lot of billions $.
I agree when you say “one man doesn’t make compagny successful” I’ thinking of that President of USA!

Here we see a view expressed by someone who was not party to all the submissions of Boeing or BBD. It is just an opinion, which he is entitled to. Interesting that he seems so confident. I take it with a pinch of salt and will wait for the outcome.

The point here is that a determination of a threat of material injury shall be based on facts and not merely on allegation, conjecture or remote possibility (Article 15-7* as per the Agreement of Subsidies and Countervailing Measures).

The fact of the matter is that the US Commerce Department has not established a causal link between yet to be “dumped” CS100s to Delta Airlines and a material injury to Boeing. Hence, Boeing “winning” on walkover in a US-type kangaroo court is not in accordance with WTO rules if the US Department of Commerce has not conducted a detailed investigation that shows properly that Boeing has been hurt be the CSeries.

–

…and Don, please don’t respond with yet another crackpot theory of yours — you know, like you did in that other thread:

True, if the case is based on facts. The case should be dismissed, however, if it’s based merely on allegation, conjecture or remote possibility.

Face it Don, there’s no case here for Boeing and the US Commerce Department that’s based on an agreed legal WTO foundation. What we are witnessing here, however, is Boeing that is using raw government power to advance their commercial interests. At least, you should be honest about it instead of renegading on the fact that Boeing’s claim of material injury is based on nothing but allegation, conjecture and remote possibility.

If the CSeries ends up costing 50M in the US, maybe it is a nonstarter. That still leaves 80% of the single aisle market to compete at Delta pricing (25M?) to the rest of the world. Six continents, Canada, and Mexico don’t have to pay tariffs.

Currently 52% of the value is from the US. With final assembly in Alabama, it will surely go to 55-60%.

Does a collection of airplane components making up 40% of an aircraft reasonably constitute a “partially assembled airplane?” This may yet make fodder for a legal case, but to me it certainly does not.

As an example, Mercedes Sprinter is imported to the US as a knock-down kit (CKD) and as such it’s not subject to the infamous “chicken tax” applied to imported trucks. And in that scenario nearly all components are imported, and imported together, with much less value add in the final assembly.

Glad moving the headquarters to Chicago has finally–finally–helped Boeing learn something! How you say? They’ve learned…wait for it…”The Chicago Way”! ” They come at you with a knife, you go at them with a gun.” “They put one of yours in the hospital, you put one of theirs in the morgue.” (Credit: “The Untouchables”.) RIP, Bombardier! LOL

The ITC is a kangaroo court of political toadies whose mandate is USA first and always. The fact that they accepted Boeing’s ludicrous claims that the very future of the company, (the same one making record profits and sales with the aircraft BBD is allegedly dooming), is at stake. Not just that, the CSeries was going to doom the entire US aerospace industry.

Commerce not just accepted these fairy tales, but doubled down on them…even before laying down the hammer again claiming BBD intransigence.

Anti dumping laws are allegedly in place to protect domestic industry from unfair foreign competition. In this case, there was no competition. The CS100 didn’t compete with any Boeing product. No product…no unfair competition…no dumping. All you have, at the worst, is a foreign company willing to sell at a loss to lucky US consumers.

How do we know there was no competition…? The only real way one could know…the CUSTOMER said so. Delta very clearly stated in the hearings that Boeing doesn’t have a plane that can do what the CS100 can. Boeing admitted as much by not even offering one of their planes to Delta, instead offering used Ejets and 717’s.

Commerce completely ignored Delta’s testimony and bent over for whatever Boeing wanted and more. They ignored logic and fact, and ruled based on fantasy and whimsy.

My regret in the deal with Airbus is that BBD didn’t wait until the US Court of International Trade ruled. They are actually a real court, not a paid for by business version of Judge Judy.

At the CIT hearings, the burden of proof is on Boeing to show real harm.

@Kevin:
“..hard to imagine the Trump admin. would levy 300% on a aircraft…”
On 48% of the aircraft value according to what Perry said in the story:
‘duties of about 300% only apply to 48% of the airplane, not 100%, he said.’

“…assembled in Alabama from parts that are over 50% American content.”
Well, the state of Alabama could theoretically offer tax+land lease breaks to Airbus(a la what Boeing got fm W.A. & S.C. and apparently permitted by WTO rules) @ a value equivalent to 144% duty on every ‘imported’ CS1 in return for Airbus investing in a CSeries assembly line @ Airbus Mobile. The Trump admin/Fed can then use the duty collected fm CS1 to increase Fed funding specifically for Alabama state infrastructure projects to compensate for its lost in tax+land lease Rev$ fm Airbus Mobile…..and everyone is back to status-quo in terms of their relative financial positions plus:
1. Trump admin & Boeing can still claim trade justice has been done.
2. Trump can claim winning more U.S. employment for Alabama.
3. Airbus can claim no net financial loss for ‘importing’ CS1 for DL.
4. DL still getting their CS1 without liability in duty.

Transfer pricing can be used to make the tariffs tiny, they can AB Europe can sell the parts to AB USA for $1, in turn AB USA can sell the plane back to AB Europe real cheap, then AB Europe can sell the plan to the buyer for what they agreed. Since the non USA parts were sold for 1K then then tariff would be 4K … big deal

LCC’s don’t like mixed fleets but 100+ of a type is most likely enough critical mass. This layout gives >15% personal space than the standard on Ryanair for example, which one would you prefer to fly in?

It should have good seat mile cost, need only 3 attendants in cabin, good field performance, etc, etc.

The rules the US agreed to are no tariffs on aircraft and aircraft parts. Yet here they are breaking the rules. In order to place tariffs after signing the aircraft FTA they had to go to the WTO, yet they did not. Now they can place tariffs on the Cseries, but its really a European multinational they are taking on and risking a trade war with Europe. Not so easy now.

I was just taking a look at the USITA website to see what, if anything, was going on in the C Series anti-dumping and CVD cases in the last week or so. One development that I thought was of particular interest is that USDOC has invited the parties in the case to submit factual information and briefs regarding the relevance of the Airbus C-Series acquisition to the present anti-dumping and CVD cases. Factual information was due on 11-6-17, briefs are due by 11-13-17. Boeing, Bombardier, and Delta filed factual information by the 11-6 deadline, so far no briefs have been filed. Bombardier, perhaps having learned from their experience in the preliminary anti-dumping case, submitted factual information, and thus did not stupidly forfeit to whatever factual information Boeing submitted. while stating the following.

“Bombardier makes this submission to comply with the Department’s instructions in 11/01 Memorandum and without prejudice to Bombardier’s
opportunity at a later date to challenge the appropriateness of the Department placing the 11/01 Memorandum on the record.”

SUBJECT: Antidumping and Countervailing Duty Investigations of 100- to
150-Seat Large Civil Aircraft from Canada.

RE: Opportunity to Comment on Proposed Transaction

The Department of Commerce (Department) has noted that in a press release dated October 16, 2017, Bombardier Inc. (Bombardier) indicated that there is a planned transaction between Airbus and Bombardier which, according to the press release, is “currently expected for the second half
of 2018.” See Attachment I, which contains a press release published on Bombardier’s website athttp://www.bombardier.com/en/media/newsList/details.binc-20171016-airbus-andbombardier-
announce-c-series-partnershi.bombardiercom.html?filter-bu=all&f-year=all&fmonth=
9&f-type=all&show-by-page=50&page= 1 &f-min-year=2002, last visited November 1,2017.

The Department does not have any details on this proposed transaction. The current antidumping duty (AD) and countervailing duty (CVD) investigations of I00- to 150-seat large civil aircraft from Canada cover the time periods April 1, 2016, through March 31 , 2017, and January 1, 2016, through December 31, 2016, respectively, and apply to large civil aircraft
whether they enter the United States fully or partially assembled. Interested parties in these investigations are invited to provide views on the implications of this announced transaction. Pursuant to 19 CFR 351.301(c)(4), the Department is allowing parties to place rebuttal factual information on the records no later than November 6, 2017. Further, we are allowing parties the opportunity to submit briefs regarding this proposed transaction no later than November 13, 2017. The comments in these briefs must be limited to a discussion of the effect of this announced transaction on the ongoing investigations. Rebuttal briefs, which are limited to issues raised in the aforementioned briefs, must be submitted no later than November
17, 2017. All rebuttal factual information and comments should be placed on the records of both the AD and CVD investigations.